Blog

Student Loan Consolidation Deadline 6/30!

June 26, 2012POST CATEGORY:

Young Professionals

If you’ve got Student Loans, you need to be aware of this deadline and the opportunity it presents.

The Department of Education is offering the opportunity to consolidate student loans from a private lender with student loans held directly by the Department of Education. The opportunity to consolidate these Direct Student Loans as well as any Family Federal Education Loans (also know as FFEL Loans) is going to expire on 6/30 and I think that it’s an amazing opportunity to simplify your financial life, as well as potentially benefit from other federal student loan program benefits such as forgiveness programs that are not available to loans issued by private lenders

A few key benefits:

This program would allow you to have one servicer and one payment for all of your eligible student loans. That’s a huge benefit. I’m always recommending to clients that they simplify their financial lives and consolidate accounts when possible, and this is a great opportunity to do just that.

You can save on interest. Loans consolidated in the program will receive a 0.25% interest rate deduction on any private loans that are consolidated. The interest rate is fixed for the life of the loan, so you’ll lock in your current terms. (If you sign up for automatic debit from your bank account, you can save another 0.25%. That’s easy savings.)

Eligible for Public Service Loan Forgiveness Program. If you work for a public entity or certain 501(c)3 not for profits, you may qualify for the balance of your loans to be forgiven after making 120 contiuous payments. This is a huge benefit for those of you that work in education but don’t qualify for the teacher student loan forgiveness programs, or for others who work for other not-for-profits.

To consolidate your Student Loans, go to www.studentloans.gov and log into your account. If you’re eligible, you’ll have a message in the “Alerts” box on the top right of the page. Here’s a link to the Department of Education’s Frequently Asked Questions about the program.

If you have any questions, please contact me and I’ll do my best to help you out!

100 Minus Your Age? – Financial Rules of Thumb Series

June 22, 2012POST CATEGORY:

COMMENTS: 0 Comments

[This post is part of the Financial Rules of Thumb series. Check out the rest here!]

Today’s rule of thumb is:

“100 minus your age equals the allocation you should have to equities in your portfolio”

The Upperline: It’s far more important to know how much risk you’re comfortable with, than to use this as a guideline.

This rule of thumb is dangerous not because it’s generally untrue, as I think that this is often a reasonably appropriate guideline for many investors. The problem is, if it’s not right for you, it could have huge consequences. I often hear from investors that they’re taking more risk in their 401k because they’re younger. Conversely I hear from investors nearing retirement that they’re moving their entire portfolio into bonds and Certificates of Deposit.

That may be exactly what they should be doing, but the problem is that those strategies don’t have value on their own. Those strategies only make sense within the context of your personal risk tolerance and your family’s financial goals. Continue Reading…

“If You Don’t Get It Built, The Work Doesn’t Matter”

June 20, 2012POST CATEGORY:

Money and your Brain

COMMENTS: 0 Comments

The above is a great quote from Seth Godin’s Blog today. He references the work of architects and how it doesn’t matter how beautiful the plans are if the building never gets constructed.

I think Financial Planning operates in much the same way. We can craft elegant financial plans for clients that will help them reach their goals. We can generate pages of material to back up these plans, and present them in a beautiful manner.

But if we can’t help clients build those plans, brick by brick, month by month, it doesn’t matter. We’ve given them beautiful blueprints for a building that will never exist.

What’s more important? The plan, or the outcome?

We all need to focus more on the daily and weekly actions that will lead to successful years and ultimately to a life well lived, and with the financial resources that support our goals and dreams. This reason is why an ongoing relationship with a financial planner that can help to guide and revise plans as life’s inevitable changes come at us is so important. Writing a plan and putting it on your bookshelf isn’t going to help you reach your goals. Regular consultations with a caring planner can.

Inherited IRAs: What You Need To Know

June 14, 2012POST CATEGORY:

COMMENTS: 0 Comments

I’ve recently had issues with a few different clients recently who have inherited IRAs and are not clear on the rules surrounding them. Here are a few questions that can help you understand the rules around your Inherited IRA.

Was it your spouse’s IRA? If so, you can generally combine it with your own IRA. This can greatly simplify your financial situation, but there can be reasons to maintain it separately (if there are children from a previous marriage who will ultimately inherit the remainder of this account, etc). You will need to eventually take Required Minimum Distributions from this account, but typically not until after you’ve reached age 70 1/2.
Was it your parent’s or aunt/uncle’s IRA? Or anybody else that you weren’t married to? Things are a bit trickier with IRAs inherited from your parents. You must begin taking required minimum distributions (RMD’s) on those assets by December 31st of the year following the account owner’s death. The RMD rules are critical, and must be followed explicitly. The tax penalties for not taking your RMDs on time are severe, so be sure you’re on top of this. A simple calendar reminder in November of each year to check and be sure you’ve taken your distribution for the year can be enough to save you from a costly mistake.
Were you named as the beneficiary of the IRA? Or did the deceased’s estate take ownership and transfer it to you through the probate process? I realize this is a bit of industry jargon, but the distinction is critical. If you were named as the beneficiary of the IRA, you can ‘stretch’ out the distributions from that IRA over the course of your working life, allowing you to extend and benefit from the tax-favored nature of the asset. If you were not named as the beneficiary directly, you need to know how old the person whose IRA you are inheriting was when they passed away. If they were over age 70 1/2, then you can take distributions over the IRS tables calculated based on their life expectancy. If they were under age 70 1/2, then you must take the distributions over 5 years and the entire balance of the account must be completed distributed by December 31st of the fifth year after the IRA owner’s death. (You can find the tables and other great information in IRS Publication 590, which has everything you’d ever want to know about IRAs).

The above general principles should help you stay on track when inheriting an IRA. If you’ve got additional questions about your situation, please contact me and I’ll do my best to answer your questions.

Who Are Your Beneficiaries? Are You Sure?

June 12, 2012POST CATEGORY:

COMMENTS: 1 Comment

I’ve been working with a client who is in the process of settling their deceased father’s estate, and dealing with the many issues that have arisen as a result. One of the father’s retirement accounts was left without a named beneficiary, and it’s caused some issues that could have been easily avoided. It’s hard enough for family members to deal with the emotional issues surrounding the loss of a loved one. Take a few minutes today to make sure that the lack of (or an outdated) beneficiary information doesn’t further complicate their life at a difficult time.

Think for a moment. Have you had a major life change? Did you get married or divorced? Did you have a child, or another child? Are you certain that your beneficiaries are up to date? That the person you want to inherit those assets will receive them? Every planner I know has run across a situation where a previous spouse has inherited an asset long after the marriage was dissolved, simply because the beneficiaries weren’t updated.

Now, you might think that because you’ve updated your will, you’re all set. That would be incorrect. A number of accounts pass at death according solely to the beneficiary listed on the form so it pays to double-check.

So what accounts should you check?

Insurance: Do you have any life insurance policies? That you purchased directly from the carrier? That are provided at work?
Retirement Accounts: Any Traditional IRA, Roth IRA, 401(k), 403(b), or pension plan that you have will have a listed beneficiary. Are you certain that they’re up to date?
529 College Savings Plans: These are a little different, as the beneficiary is the future college student, and that doesn’t change if you die prematurely. You should name a successor owner to inherit and manage the account if you’re not around to do it.

A few minutes making a quick list of these accounts, with the beneficiary designations, would be a great list to include with your wills and other important documents. It can go a long way to making a difficult transition easier, and giving you peace of mind that your affairs are in order.

Teaching Kids Using “Money As You Grow”

June 7, 2012POST CATEGORY:

Kids and money

COMMENTS: 0 Comments

The President’s Advisory Council on Financial Capability recently released a wonderful website and poster called “Money As You Grow”, targeted at helping parents and children have more conversations about money.

Talking about money with kids is a topic that often comes up when meeting with clients, and I’m glad to see such a well-done tool become available to the public. It breaks down children into age ranges, from 3-5, 6-10, 11-13, 14-18, and 18+ and provides 4 specific pieces of financial education (called Milestones) focused on each age group. Each ‘milestone’ comes with 4 activities that can foster conversation and understanding between children and parents on the topic.

It seems there was a shift some years ago, where money became a taboo topic. Families don’t discuss money at the dinner table, and parents often try to hide money struggles from their children (which rarely works, just ask your adult children if you have them. They know when things are good and when they aren’t). It’s my hope that we can all talk more frequently about money. The more we talk about something, the less scary it becomes and the better decisions we can all make.

Take a moment and check out the Money As You Grow tool, and please share your thoughts with me about it and other tips you’ve got on teaching children about money!

A Financial Plan for When (If) You Get Laid Off

June 5, 2012POST CATEGORY:

COMMENTS: 0 Comments

We’ve all seen the news about the Times-Picayune no longer publishing on a daily basis, and the reduction in staff that will certainly follow such an announcement. Beyond the obvious effects on all of us as readers, the lives of dozens if not hundreds of the employees who will be laid off are thrown into turmoil who are all facing a lot of difficult decisions in the aftermath. It’s an unfortunate reality of the world we live in that news of layoffs is becoming all-too common. I’ve been through it (I was laid off by Janus Mutual Funds in 2001 after the tech-stock bubble of 2000) and many of my friends have been as well. The fact that it’s more commonplace doesn’t make it any easier to deal with.

So what can you do when your financial world changes in a moment? Start with the essential questions that I’m sure you have. I think what you need to know right away is:

Is There A Severance Package? If there’s additional money that you can expect which can help you with your transition, or is the check in your hand the last one you’ll be getting?
What’s Happening With The Health Insurance Plan? Are employer-subsidized health insurance benefits going to continue throughout the severance period, or possibly longer? Do we qualify for COBRA?
Is There Job Placement Assistance? Has the company contracted with a placement firm to help those that have been laid off find new employment?

Once you’re past the initial shock, start to look ahead. Here are 7 things to consider in those coming days:

No Snap Decisions. There are a lot of decisions to be made, but rushing decisions often leads to bad decisions. Don’t put a lot of pressure on yourself to figure everything out the day you receive your paperwork. Instead, take a deep breath and:
Reconnect to Your Vision. What would you do if you could do anything? What have you been telling yourself that you’d always want to try? Are there items in your answers that are worth pursuing at this time?
Get Organized. There will be a lot of decisions to make, and lots of deadlines to keep track of. Without the routine of a daily job and the calendar at the office that you’ve become accusomted to, you can start to lose track of a lot of small details. Get a calendar that you can trust, and start to put the important deadlines on them. When do you need to turn in your COBRA paperwork? Are there any deadlines around rolling over your 401k?
Communicate With Your Colleagues. If you were part of a larger-scale layoff, chances are you know many other people who are going through the same challenges you are. Can you share questions and answers with some of your friends that you trust?
Preserve Cash. It may take longer than you think to land the new job you’ve been hoping for, or it may not offer some of the benefits that your previous job did. Saving your cash can give you more choices and stability while you work your way into the next phase of your professional life.
Remember That You’re Not Alone. There are people around you who love you and who are there to lend a hand. Be thoughtful and reach out to them. You’d want to do whatever you could to help them if the shoe was on the other foot, so don’t let your ego stop you from asking your friends for introductions, job leads, or just a shoulder to lean on.
Believe in Yourself and the Future. Know that transitions are always hard, and know that you’ll come out of the other end stronger for it.

With some focus and smart decisions, you can land on your feet and hopefully look back one day at how far you’ve come from these difficult times.

What Do You Do When You Mess Up?

May 22, 2012POST CATEGORY:

Money and your Brain

COMMENTS: 1 Comment

I think we’d all admit that making mistakes is a part of life. Yet, we seem to think that we should never make mistakes when it comes to our money.

Life is about learning and growing, and the best way we have to do both is to make some mistakes. Rarely are these mistakes catastrophic on their own, but a lifetime of making the same mistakes over and over can seriously derail your plans. So how can better move on when we mess up, and avoid those bumps in the road in the future?

1. Be Accountable to Yourself. You can’t make better decisions in your life for anybody else, you can only make them for yourself. Look inside and ask yourself what that decision was about. Was it about control? Fear? Soothing your anxieties with the rush of purchasing something new? No matter how much you might want to change your spending behavior to be a better spouse/parent/role model/etc., you’ll never be able to successfully change unless you’re doing it for yourself. Make different decisions because you want to be proud of yourself. This will build your integrity, and your ability to withstand temptation in the future.

2. Don’t Hide. If you’re committed to having the relationship with money (and your partner/spouse) that you want, you can’t hide your mistakes. It creates distance in your relationships and it reinforces any negative self-views you have about money (“I’ll never be able to handle my own money”). This is scary and difficult, and I know from experience that I’ve ducked conversations with my wife about my spending because I was afraid of what she would think. If you’re fortunate as I am to have somebody caring and understanding in your life, open up to them about it. After all, you’re in it together.

3. Avoid Situations That Lead to Choices You Regret. Are there certain places that lead you to spend more than you’d like? Trips to the mall for no particular reason? Drinks after work that turn into dinner and more drinks later? Look at those patterns that you see and find ways to insert other positive behaviors into those spaces.

I don’t anybody can reach perfection when it comes to their financial decisions, but I think we could all do a little better. Hold on to yourself and start making decisions that you can be proud of today. Stack one day on top of another and soon you’ll have a pattern, and you’ll feel that integrity growing inside of you. You can do this, if you focus on the positives and do it for yourself.

How Much Money Do You See?

April 24, 2012POST CATEGORY:

Cash

COMMENTS: 1 Comment

Think about that for just a second.

How much of your money do you actually see? In your hands? In your wallet?

If I had to guess, it would be somewhere less than 5% of your total income. You can even include checks that you write in that amount. I’m guessing you write one or two per month. I own my own company, and I’m averaging fewer than 1 check per month.

Our money flows around us invisibly. The money we earn gets directly deposited into the bank. We set up automatic payments for our mortgage, loan payments, insurance, and anything else that we can automate. We swipe our cards and pay for clothes at the department store, groceries, and dining out. I can even pay for coffee at Starbucks now with my phone.

And is it any wonder that we feel like we don’t really have the control of our finances that we’d like?

Now, I’m not suggesting you switch to cashing your payroll checks at the bank and using envelopes in a drawer to manage your finances. I am suggesting that we do need to take extra steps to have control of our money, since we don’t carry it around in our wallets any longer.

Track your spending weekly, rather than monthly. This one activity makes budgeting so much easier. Don’t wait for 4 weeks of expenses to pile up, look at it each week for 15 minutes. What spending decisions are you happy with? What spending decisions do you wish you’d made differently?
Spend cash for discretionary expenses. If you give yourself $100 per week to spend, hit the ATM and use that cash for a week. It’s easy to tell at a glance how you’re doing at any point by just opening your wallet.
Have a plan for ‘leftover’ money. If you don’t spend your weekly discretionary money, what can you save it for? The more compelling, the better. If extra money goes into the ‘Paris’ or ‘New Car’ fund, you’re more likely to have some leftover than if it goes into the ‘savings’ fund.

Lending Money to Adult Children? 4 Points to Consider

April 16, 2012POST CATEGORY:

COMMENTS: 1 Comment

I had a conversation recently with a retiree who was approached by their child for a loan to start a business. Lending money to children can be a messy business if not done properly. As a new parent, I can understand the drive to want to help your children in every way possible, but as an advisor there are important factors to consider for all loans to children. I outlined 4 points to my client, which I’ve listed for you here below:

Don’t compromise your lifestyle. If lending money is going to mean that you have to reduce your standard of living in order to make this loan, it should be a no-brainer to hold off. Yet, I’ve seen circumstances where retirees even go back to work because the loans that were made have decreased their income substantially. If lending the money is going to cause a huge strain on your finances, you’ve got to say no.
It’s ok to lend to one child, and not another. This isn’t about playing favorites as a parent, which I know you would never do. It is about knowing your children and understanding their financial personalities and their ability to repay the loan that you’re making to them. Some are more credit-worthy than others and there’s no reason that shouldn’t play a factor in your decision. Lending your financially-responsible child money for a down-payment on their home is one thing, lending your more creative child money to take a spiritual trip around the world is another.
Get it in writing. Just because it’s a loan between family members, doesn’t mean that you don’t need to take care of the legalities. In fact, it’s all the more reason to make sure both sides are protected. What is the interest rate that they will pay on the money? When are payments due? What happens if they can’t make payments? Better to discuss these factors in advance rather than assume you’ll be able to deal with them if something happens. It’s much easier to talk about these questions before trouble arises so be courageous and have the conversation. Get all parties to sign on the dotted line, and stick to the terms.
Consider equalizing your estate. If you pass away before the loan is repaid, consider having your executor equalize the estate with other assets. This still relieves the child of the obligation to repay your estate, as well as setting up a mechanism for your other children to not feel like they received less money from you because of the loan that was made to their sibling.

These four points can be the starting point of a healthy discussion about lending money for you and your child. Are there any other items you’d add to my list? Please add them in the comments below!

Page 3 of10«1 234 5 »...Last »